July 22, 2011

Why would Steve Jobs be interested in Hulu? The answer may be in Tarheel Country, specifically Maiden, near I-77.

That’s where you’ll find Apple’s mammoth new data center, built to handle iCloud and a lot more. How much more? Look at some numbers: This center is either 500,000 square feet (AppleInsider) or a million (Robert Cringely). By comparison, according to Cringely, IBM’s Special Events Web Service, which handled data for the Olympics, has three data centers with a combined 2000 square feet.

Any way you calculate it, iCloud by itself will not generate the data needed to give Apple anything approaching a suitable return on capital. But wait! Isn’t Apple trying to fast track the consumer transition to the cloud by phasing out (or minimizing) internal hard drives? The new Mac Mini, introduced this week, has no optical drive and neither does the Mac Air, which replaces Apple’s aging MacBook. Meanwhile, you’ve never been able to play a blu-ray disc on your Mac.

But that’s still not nearly enough data to pay for the Maiden center, especially given Moore’s Law (“the number of transistors on a chip will double about every two years”).

Let’s go one step further and factor in compression. Even aging microchips in the Apple line have an H.264 encoder/decoder that apparently can compress a 1080p audio/video stream into four megabits per second. That compares with about 20 megabits in normal circumstances or perhaps 24 for better HDTV.

Here’s the short answer on Hulu: Apple has pumped a huge amount of money into North Carolina but its returns, even if iCloud takes off, will be paltry-to-negative. Even if you forget the money (Apple is sitting on $76 billion, after all), the black eye for the company would be a huge embarrassment.

So Steve and his colleagues need to do something fast. Buy Hulu and integrate it into iTunes. It’s not a great solution but as Richard Dreyfus demanded from Roy Scheider in Jaws, “You got any better ideas, hot shot?”